My home state of Illinois is de-regulating its electricity.
The 10 year rate freeze on the price that utilities can charge customers is ending, and the utilities, such as ComEd in Chicago, will now purchase power at an annual auction.
The auction will be conducted over the internet, in a "descending clock" format. This means that the utilites will get bidders offering more electricity than they need, and will keep lowering the price until enough bidders drop out, and the electricity being offered meets their needs.
No matter what else happens, everybody agrees that Illinois electricity rates will increase because of the ending of the price freeze.
The controversy, however, is over whether the auction will keep the increase down, or whether consumers will pay needlessly to enrich Wall Street companies like JPMorgan Chase.
Excelon (the parent of ComEd) owns nuclear reactors and is the largest generator of electricity in Illinois. Under the terms of the auction, Excelon can only sell a limited amount of electricity. These rules were designed so that the auction would be competitive, and drive down prices.
Critics say the competition is an illusion because the auction is open to anyone, even if they cannot generate electricity on their own. So, they think that firms like JP Morgan and Shell will buy cheap electricity from Excelon and re-sell the power at a mark-up during the auction.
New Jersey started using the same type of auction in 2002, and electricity prices have increased 100%. State officials say that bidding by financial companies hasn't caused any problems, and that the prices would have gone higher without the auction.
The critics think it will be cheaper to scrap the auction and have Excelon sell its power directly.
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